With eye on the parliamentary elections scheduled to be held sometime next year, the UPA government is doling out packages for the ‘Aam Aadmi’ or the masses. After the railway minister Lalu Prasad Yadav’s populist railway budget that saw across the board reduction in railway fares and proposals of more employment generation in the Indian Railways not withstanding the fact that the world’s largest employment generator is already overstaffed, it was now turn of the Indian Finance Minister to release his populist annual budget.

In an era where across the globe the participatory role of the government in economic activities is shrinking, India is perhaps few of those countries that still rely on fiscal plans to decide the fate of the economy. In India, the central government spends around $45 billion on the annual plan spending that is more than double the total amount of loan the World Bank gives every year to all developing countries. If the annual budgeted spending was properly utilized then a lot could have been achieved in improving the living conditions of the masses. However, institutionalized corruption in the country has inhibited such a possibility. The National Rural Employment Guarantee Act has definitely helped in generating 100 days of employment at minimum wages for each rural poor household but with 44% failing to be benefited from the programs,a lot remains to be done.

The current fiscal budget is being dubbed as a populist budget with its eye on the forthcoming elections. For a democratically elected government to present the aspirations of its electorate in its financial spending is not only desirable but it is a part of their duty. It now remains to be seen who among the Indian citizens have actually benefited from the populist measures. By giving tax breaks, demanding lower EMIs on housing loans, reducing excise duties on small cars and two-wheelers the government has benefited the corporate sector and the upper middle class, a large number of them unfortunately for the political parties do not take the pain to stand in long cues in the voting booths.

In its effort to garner popular rural votes in the elections the budget has proposed waiver of agricultural loans. At the first sight, it might be seen as the most populist measure to be offered by a government whose leaders in the last decade in order to reduce the rising volume of non-performing assets in the nationalized banks had put hold on loan waivers while formulating stringent lending norms. A one time loan waiver without reforming the fundamentals of the agrarian economy will not help the Indian cultivators. With agricultural growth falling to 2.6% in the last fiscal year, rise in food prices, excess dependence on agriculture as the main source of livelihood and dependence on unorganized private moneylenders for finance will foil the noble intentions of the framers of this year’s annual budget. The government has failed to implement the recommendations of Arjun Sengupta Commission in this budget that required the government to grant social security and free health insurance to workers in the unorganized sector. There has been no provision to grant easy loans to entrepreneurs in small sector industries, providing incentives for training and marketing.

Before arguing on whether populism is good or bad, we should see whether populism is properly directed.

Source: KhaleejTimes
Image:Hindu Business Line